Flying a dog first-class to an exotic island so it can be shown off at an exclusive wedding. Planning an elite Manhattan soiree. Chartering the Concorde to fly to Antigua. Welcome to the world of very, very high-end luxury services. It's a world that Victoria Pericon, 30, lives in every day as founder of lifestyle-management firm Victoria Pericon Inc. in New York City.

Her "Club VP" is an invitation-only club that charges clients a $120,000 annual retainer fee, plus expenses, to take care of anything they need, from the glamorous (planning glitzy Mediterranean parties) to the mundane (waiting on hold with customer service to ask a software question). Pericon has three employees and hires outside consultants to work with the company's clients, who tend to be celebrities, socialites and CEOs. "We don't allow people to just call up," says Pericon, who has run the company for four years with her husband, Roman, 30.

Maybe you've wanted to start your own luxury business ever since you watched Joan Collins and Linda Evans duke it out on Dynasty. But maybe you're thinking now may not be the time to make your move. Retailers just had their worst holiday season in 30 years. Unemployment is at an eight-year high. Consumer confidence seems to be sputtering, too: The Consumer Confidence Index, a monthly survey of 5,000 U.S. households, fell 14 points in February, and consumers' feelings about the economy were at their lowest since 1993.

When you're targeting a very specific market--like luxury spenders--your focus has got to be spot on. "3 Rules for Niche Marketing" will help you aim clear.

Although the average consumer is spending conservatively, there's still a lot of money out there. The number of "almost rich" (households earning between $100,000 and $150,000 per year) has doubled. Last year, 15.1 million U.S. households earned more than $100,000 per year, according to the U.S. Census Bureau. The very rich, meanwhile, are getting richer: Between 1991 and 2001, the incomes of the top 5 percent of U.S. households increased from 18.1 percent to 22.4 percent of the total of all personal income earned in the United States.

The reality is that there are several categories of wealth today, says Arnold Brown, chairman of Weiner, Edrich, Brown Inc., a trend analysis firm in New York City. There are the ultra-rich (those worth at least $100 million), the rich (those earning at least $250,000 per year and having assets of at least $3 million, not including their homes) and the upper middle class (those earning $100,000, with assets of least $500,000, not including their homes).

The creation of wealth in the past decade is giving entrepreneurs more opportunities to sell luxury products, says Paul Nunes, senior research fellow at the Accenture Institute for Strategic Change in Cambridge, Massachusetts: "We're seeing companies coming into [the luxury] space as they recognize there's this segment now that has a whole lot more money."

Pericon won't dish names or sales figures--"Discretion is important," she says--but her business continues to grow. In June, the Pericons are launching their own magazine, Manhattan Syndicate, devoted to the affluent Manhattan lifestyle.

Creating Relationships

These days, luxury is about "services, experiences and conveniences," explains Brown. The rich "want something different."

A survey of 3,500 consumers released in November by Accenture, however, reveals that even the wealthy may not be spending as often as they'd like. Nearly 87 percent of Americans earning more than $150,000 said they'd be willing to spend more if they could find "better" products and services. Wealthy respondents, much more so than people in lower income brackets, lamented the lack of innovation in clothing, household appliances, housing, home furnishings and personal care over the past two years.

The wealthier the consumer, the more they feel that lack of innovation--along with a lack of satisfaction in the companies they buy from, says Nunes, who co-authored Accenture's study. With businesses in cost-cutting mode, "there's a feeling that 'Retailers don't care about me after I've left their store,'" Nunes says. "It [doesn't] feel like a relationship to the wealthy."

Creating relationships is what success in the luxury space is all about, says Jon Robbins, owner and COO of HiFi House, a 47-year-old family-owned stereo store that made the transition to the high-end luxury audio and video electronics market in the 1980s. "We needed to establish a niche," says Robbins, 44. Today, HiFi House has three locations and annual sales of more than $20 million.

One of HiFi House's hottest sellers is the 50-inch flat-panel plasma screen TV, which sells for about $10,000. The company custom-installs these TVs with DVD players and surround sound to create a home theater system. HiFi employees also teach owners how to use them.

An average HiFi sale is between $20,000 and $25,000, and the company sold 40 plasma TV packages in December alone. Upscale professionals looking to furnish million-dollar homes constitute a "significant percentage" of HiFi's business.

Robbins says his biggest challenge is finding employees with expertise in design and installation, as well as a flair for personalized customer service. It's no accident that most of the Broomall, Pennsylvania, firm's 75 employees have been with the company for 10 years or more. "This is their career," Robbins says. "You do the job right, and the dollars take care of themselves."

Hiring employees who view their jobs as careers is essential in the luxury business, says Gregory J. Furman, executive director of the Luxury Marketing Council in New York City. This means building a team from the start and offering great pay and incentives. "Your employees have to be strategic partners," he says.

You also have to think about whom you're trying to reach. Although the rich have been stereotyped as tireless shopaholics, the opposite seems to be true. When Accenture asked those earning more than $150,000 a year if they enjoy shopping when they don't have a specific purchase in mind, 80 percent said no. Says Nunes, "They tend to be very directed in their shopping in terms of how they can save time."

If your luxury service targets the very wealthy, be prepared to expand in ways you can't anticipate, Pericon warns. Her company is doing things she never imagined it would do, such as finding electricity for a remote island one of her clients had bought. The very rich "make the assumption that you'll do anything," she says.

Pericon keeps an extensive database of contacts ready for any situation: "In the luxury lifestyle, you have to have a lot of people you know you can call upon."

Follow the Money

There are 15.1 million U.S. households earning $100,000 or more per year (source: U.S. Census Bureau).

By 2007, the number of people who earn $100,000 or more per year will jump by 63 percent (source: Claritas Inc.).

By 2007, there will be more than 6 million households with 55- to 74-year-olds whose annual income is $100,000 or more (source: Claritas Inc.).

Getting Your Shot

So how does the average person break into the luxury business?
Just ask David Lance Schwartz, 42-year-old founder and CEO of
David Lance New York
(DLNY), a private-label men's clothier founded in 1995. The
110 customers frequenting Schwartz's New York City store are
Wall Street high-fliers and CEOs of major corporations who earn
more--often much more--than $1 million a year. They buy
Schwartz's custom line of business suits, ties and shirts. Each
suit ranges from $3,250 to $15,000; shirts cost $275 to $625.
"Why do people come here? Because they can," Schwartz
says.

His core clientele still spends very strongly despite the
downturn, and sales have increased 45 percent since 1999. "The
volume of people we typically would see is down. But the volume of
money that's being spent is up," Schwartz says.
"Clients come in, and I ask how business is. They say 'It
sucks. That's why I'm here. We've got to keep this
economy moving.'"

Business for those catering to wealthy customers is not as off
as it is for those in similar businesses who are dealing with the
mass market, Schwartz says: "I completely disagree with the
theory that this is a bad time to start a luxury company."

It's hard, however, to imagine any entrepreneur going into
the luxury market from Day One, he says. You'll need experience
to build your confidence because you'll have to be very
persuasive to land your first client.

Schwartz remembers persuading a wealthy businessperson to give
him a chance when he started his first clothing business in Los
Angeles in the mid-1980s. (He sold that company in 1995 to start
DLNY.) Once he swayed that first influential client and delivered
on his promises, he was on his way with word-of-mouth
referrals.

"I would say: 'At some point in your career, someone
cut you some slack and gave you a shot. I'm asking for that
shot,'" Schwartz says. "You need a constant sense of
being good at what you do. I was one confident little
guy."

DLNY has expanded into a complete wardrobe service. Schwartz and
his six employees go to a client's home and swap out last
season's clothes. They mend the garments and contract with two
top New York City dry cleaners to clean and store the wardrobe
until next season. The service, which was suggested by a client and
initially tested on a few customers, now includes 25 clients.
"Take good care of your core people," Schwartz says,
"and they'll take care of you."

Creating Value

While marketing messages to the rich have been purely emotional
over the past few years, they're now including clear value
propositions, says Dave Kroencke, principal at The Richards Group,
an advertising and marketing agency in Dallas, where he works with
luxury product manufacturers such as Bernhardt Furniture and
Sub-Zero. "You have to define your target audience," he
says. "You need to use niche marketing and advertising tools
to reach them."

A combination of niche advertising, trade show booths and
word-of-mouth is working for Ken Hey, CEO of Sunstream Corp.,
a firm with 26 employees in Kent, Washington, that caters to the
high-end boat market. Sunstream makes high-speed hydraulic,
remote-controlled boatlifts that retail from $4,000 to $30,000.

The 6-year-old company's clients include families, retirees,
high-income singles and the super-rich. In fact, two Sunstream
boatlifts have been spotted on Bill Gates' Seattle waterfront
property. "We sell the most expensive boatlifts you can
buy," Hey, 39, says, adding that just one word-of-mouth
endorsement can generate up to five sales.

Hey, who co-founded Sunstream with his wife, Debra, bootstrapped
the business. His original plan was to sell five boatlifts in five
months, but an appearance at a Seattle boat show changed
everything--Hey walked away with 50 orders. This was an eye-opener,
but Hey really raised competitors' eyebrows when he entered the
market with products 30 percent higher in price. The move
differentiated Sunstream and allowed the company to offer superior
features with enough margin to deliver great service. "Once
you create value, you can command higher pricing," he
says.

His strategy worked. Sunstream is now the 12th fastest-growing
private company in Washington, with sales last year of $4.4
million. The company took a round of private equity in 2001, and
Hey is forecasting 77 percent sales growth in 2003.

Hey thinks entrepreneurs should enter the high-end luxury market
when times are tough because a slowdown makes it much easier to
find high-quality suppliers. "Focus on growing during a
downturn if you can fund it," he says.

Keep in mind that the rich tend to think in terms of investment
rather than consumption, and this is even more true now. Instead of
asking rich consumers what they want, find out what they don't
like in the products or services they use. "It might lead to a
breakthrough," Hey says. "Find that need they don't
know they have." Do that, and you could find yourself sitting
in the lap of luxury.

Simple Pleasures

So you want to break into the
high-end luxury market, but some of your favorite ideas--yachts,
jets, fancy cars--require cold, hard cash you just don't have.
"In luxury, [financing] is critical," says Douglas D.
Gollan, New York City-based president and editor in chief of
Elite
Traveler, a magazine dedicated to the lifestyles of the
very wealthy. "If you don't have the financing, keep the
idea in your back pocket."

Luckily, there's a whole category of "ordinary
luxuries" that don't take a king's ransom. Here are
four key areas to get you started on brainstorming:

Simplicity: In our modern
world, the $4 cup of coffee has become a luxury. Food, custom
stationery and handmade trinkets are other items that can be very
simple pleasures with an upscale feel.

Relaxation: Who doesn't
want their hair done or a relaxing massage? To add a luxurious new
twist on old ideas, bring services to people instead of making them
come to you.

Personal assistance: People
have many things today, but what they don't have is time.
There's an emerging market for luxury services that give people
more freedom. Managing someone's monthly bills, buying their
groceries and preparing their meals are just a few ideas. Think
like a butler.

Experiences: Luxury is also
about creating a personal experience. Services such as party
planning and catering tap into people's desire to be
entertained while letting someone else take care of the
nitty-gritty.